Result (4) is an attempt by me to defend myself against Wessel's charge that I do not understand that Herbert Hoover is an unreliable narrator;

Result (5)… (5) does implicitly take David to task for quoting without discussion Liaquat Ahmed's claim that in 2009 "no Keynesians or even monetarists ever realized that the numbers to make their policies work are so gigantic" (which I believe is not true) and assigning Robert Barro to the set of ""advocate[s] of the earlier fiscal and monetary stimulus" (which I think needs more nuance);

Result (6)… (6) quotes Duncan Black saying "Shorter David Wessel: 'The hippies are like so totally wrong about everything, but here's my plan in the WSJ to implement the hippie agenda.' That's a bit of an unfair characterization, but I wish pundits could just say 'here's what should be done' without pretending to float above everyone else who is wrong";

Result (7) is another (implicitly approving) quote;

Result (8) is an entirely approving explication of something Wessel had written in very compressed form;

Result (9) is made up of my notes for a Barclays-sponsored conversation with Wessel; and

Result (10) is another (implicitly approving) quote.

I understand that it is probably good for the world to have David Wessel looking over his shoulder and wondering "am I giving appropriate context to these people I am quoting?" I do think that whenever he finds himself writing something like:

How to Get the U.S. Recovery Back on Track: One set of physicians, the Keynesians, are sure their medicine worked, but the dosage was insufficient. They prescribe more stimulus, perhaps extending a payroll tax holiday that is to expire at year-end, as President Barack Obama proposes. Another set, influential among Republicans, is just as sure the medicine didn't work. They prescribe the opposite: Starve the fever—cut spending significantly and soon. A third set, influenced by professors Kenneth Rogoff and Carmen Reinhart's history of financial crises, says deleveraging is like detox: Painful, takes time and can't be rushed…

he should at least pause and think whether that is not too close to "opinions of shape of earth differ" journalism.

But I do have the most enormous respect for David. And I really do think he is much more likely to read "David Wessel alone is worth the price of the Wall Street Journal" than he is to read me calling him a fool for quoting my ideological opponents.

Unless he gives me reason.

As long as he quotes my ideological opponents in enough context for his uninformed readers to understand what fools they are.

Oops: What Bernanke Said Five Years Ago Today: Five years ago, July 18, 2007, Federal Reserve Chairman Ben Bernanke testified before the House Financial Services Committee as he is today. The housing bubble was bursting, cracks in the global financial system were just beginning to appear, but Bernanke didn’t sound terribly worried or prescient…

This notion of the government's [macroeconomic stabilization] role was not universal in the 1930s. In his memoirs, Herbert Hoover described tension within his own administration, putting words into Treasury Secretary Andrew Mellon's mouth that are routinely reported as something Mellon actually said:

In one camp were the "leave it alone liquidationts" headed by Secretary Mellon, who felt that government must keep its hands off and let the slump liquidate itself. Mr. Mellon had only one formula: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." He held that even panic was not altogether a bad thing. He said: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people"...

Who is it "routinely reports" something like this? Moi!

This is actually a difficult question, which I hope to write up properly someday:

Hoover in his memoirs is definitely an unreliable narrator. He sets himself up as opposing Mellon within the administration, when actually when push came to shove he (reluctantly) supported Mellon.

As Wessel notes on page 47, he gave himself in the early 1930s excessive vision as to the size of the problem. And he claimed that he had nothing to do with the MacArthur-Eisenhower-Patton military police action against the Bonus Marchers on the Mall.

Hoover's unreliability centers around two issues: (a) Hoover insists--no matter what the evidence--that everything was going fine and the depression was licked until the election of THAT COMMUNIST ROOSEVELT; (b) any mistakes made during his administration were the fault of unworthy subordinates--MacArthur, Mellon--who misled Hoover….

Hoover is an unreliable narrator. But odds are that his claims that, internally, Mellon was a liquidationist are sound.

The Perils of Ignoring History: There is an optimistic scenario for the U.S. economy: Europe gets its act together. The pace of world growth quickens, igniting demand for U.S. exports. American politicians agree to a credible compromise that gives the economy a fiscal boost now and restrains deficits later. The housing market turns up. Relieved businesses hire. Relieved consumers spend. But there are at least two unpleasant scenarios: One is that Europe becomes the epicenter of a financial earthquake on the scale of the crash of 1929 or Lehman Brothers 2008. The other is that Europe muddles through, but the U.S. stagnates for another five years, mired in slow growth, high unemployment and ugly politics…. No one would intentionally choose the second or third, yet policy makers look more likely to stumble into one of those holes than find a path to the happier ending.

Why? Liaquat Ahamed has been pondering that question…. "Is it because people don't know what to do (or there's disagreement about what to do)," he wonders, "or is it the politics, particularly the reluctance to ask some people to pay for the mistakes of others?"… Mr. Ahamed sees another, largely unappreciated lesson from the '20s. The few moves in the right direction then were too small for the scale of the economic disaster…. In our time, says Mr. Ahamed, "I don't think Keynesians or even monetarists ever realized that the numbers to make their policies work are so gigantic. Everyone had sticker shock."…

As best as I can see, Liaquat Ahamed's claim that "no Keynesians or even monetarists ever realized that the numbers to make their policies work are so gigantic. Everyone had sticker shock…" is simply wrong. I know that I was talking in April 2008 about how we wanted to be ready to nationalize Fannie and Freddie and use them to refinance every single mortgage in the country if it should become necessary. Christina Romer and Jared Bernstein could do the math on the demand gap in late 2008 and early 2009, and did so.

The monetarists are harder. Some--Lars Svensson, Michael Woodford, and Scott Sumner come immediately to mind--seem to have known well how much less effective open-market operations are once you hit the zero nominal bound, how large the scale of operations have to become, and how it is (we think) much better not to announce volumes of bond purchases but instead to try to engage stabilizing speculation on your side by announcing that you are targeting the forecast. Others did not seem to get it, and still do not seem to get it.

And I gotta protest David Wessel's claim that Robert Barro was an "advocate of the earlier fiscal and monetary stimulus". I remember Robert Barro in January 2009:

Robert J. Barro: Government Spending Is No Free Lunch: A much more plausible starting point is a multiplier of zero…. I can understand various attempts to prop up the financial system. These efforts, akin to avoiding bank runs in prior periods, recognize that the social consequences of credit-market decisions extend well beyond the individuals and businesses making the decisions. But, in terms of fiscal-stimulus proposals, it would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes's 1936 "General Theory of Employment, Interest and Money."… [W]e should not be considering massive public-works programs that do not pass muster from the perspective of cost-benefit analysis…

How to Get the U.S. Recovery Back on Track: The U.S. economy resembles a patient who survived a heart attack, and tells his doctor: "I took your advice, swallowed the pills and I still don't feel well." We were warned the post-recession recovery, now marking its second anniversary, would be painfully slow. It's worse…. One set of physicians, the Keynesians, are sure their medicine worked, but the dosage was insufficient. They prescribe more stimulus.... Another set, influential among Republicans, is just as sure the medicine didn't work. They prescribe the opposite: Starve the fever—cut spending significantly and soon. A third set, influenced by professors Kenneth Rogoff and Carmen Reinhart's history of financial crises, says deleveraging is like detox: Painful, takes time and can't be rushed…. If the president and Congress want to slip some growth-inducing remedies into the pending deficit deal, what should they examine with an unjaundiced eye?…

Duncan Black wishes for some recognition that some of us have been on this case--although howling at the dead, uncaring stars, for all the good we have done--for 31 months now:

Eschaton: Shorter David Wessel: "The hippies are like so totally wrong about everything, but here's my plan in the WSJ to implement the hippie agenda." That's a bit of an unfair characterization, but I wish pundits could just say "here's what should be done" without pretending to float above everyone else who is wrong.

World's Supply of 'Safe' Assets Runs Short: The world economy faces a shortage of super-safe financial assets, bonds for which there is almost no risk of default and for which the market is so big that investors can buy and sell them readily. When anything is in short supply, its price rises. The bond market is no exception. It has been pushing up the price of U.S. Treasurys, still seen as safer than nearly all alternatives….

This is the point that Cardiff Garcia illustrates with the

unwanted mutant offspring of the most important chart in the world…

In a way, it is a product of trust--or, rather, of the absence of same. Markets in which people do not trust each other are subject to adverse selection problems: they collapse, or function badly. It is the purpose of institutions, especially financial institutions, to substitute for the trust that does not exist. And when the financial underpinnings needed to substitute for trust are not present, the macroeconomy can go badly awry as well.

Consider something as simple as market exchange. My wife's and my earning power right now is not quite enough to exclude us from the 99%…. Yet somehow we can't just go to the store, pick things out, and tell the cashier: "We'll owe it to ya. We're good for it." (Indeed, the only person in this Fallen Sublunary Sphere willing right now to lend us unsecured money for a more-than-30-day term is Tom Goldstein, and he is probably getting antsy about his $40 right now…). However, it is not just cash money that an economy needs to possess in sufficient quantities to substitute for the absence of trust in spenders. Spenders give you money in order to substitute for trust. But consider businesses seeking to borrow and invest…. What they need to give you, instead of the cash that you are giving them, is savings vehicles--bonds--of sufficient expected value. Economies can have a shortage of savings vehicles as well as of cash, and can suffer Wicksellian as well as monetarist recessions. Last, there are a whole set of transactions in which what the counterparty wants is not your cash or your bond to substitute for nonexistent trust, but rather some safe and liquid collateral: a particular, peculiar bond that they are confident will maintain its (nominal, at least) value at maturity and that they are confident everybody else will be confident will maintain its (nominal, at least) value at maturity so that it will be useful as a means of raising cash in a hurry now. That's what AAA assets are good for. And when an economy is short of AAA assets, it can fall into a recession--but not a monetarist or a Wicksellian recession, rather an Minskyite recession…

(9) Brad DeLong: Barclays Debate with Robert Barro, Moderated by David Wessel: My Draft Opening Statement: WESSEL: 'If President Obama invited you into the Oval Office, told you that he recognized that the economic policies he has pursued to date haven't had the desired outcome, and gave you five minutes to tell him what in your opinion he should do now (setting aside whether Congress would go along)?" DELONG: "I would say: Mr. President: When you took office, you quickly became convinced for some reason that we were going to see a rapid, V-shaped recovery. Hence you took your task to be (a) stopping the panic, (b) recapitalizing the banking system, and (c) filling in a good chunk of the demand gap with the Recovery Act. Then, you thought, the task of macroeconomic stabilization would be finished. And so you turned your attention to (i) health care reform, (ii) financial regulation, (iii) long-run budget balance, and other issues.

"This was wrong. We do not have a V but rather an L. Our expectations that the market was strong enough to return the economy to its long-run full-employment configuration within a couple of years--perhaps with assistance from the Federal Reserve--was wrong. The short run of slack aggregate demand, high unemployment, and low capacity utilization looks as though it will last not two to three years after the downturn begin but five to ten years--or more."